Last Year, You Purchased a Stock at a Price of $53.60

question 279

Multiple Choice

Last year, you purchased a stock at a price of $53.60 a share. Over the course of the year, you received $1.50 in dividends and inflation averaged 2.9%. Today, you sold your shares for $55.90 a share. What is your approximate real rate of return on this investment?

• A) 4.2%
• B) 7.1%
• C) 7.9%
• D) 8.6%
• E) 10.0%

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price, with higher elasticity indicating greater sensitivity.

Elastic

Describes demand that is highly responsive to changes in price, where a small price change leads to a large change in quantity demanded.

Inelastic

Describes a scenario where the demand or supply of a good or service is not significantly changed when the price of that good or service changes.

Elasticity of Demand

The measure of how much the quantity demanded of a good responds to a change in the price of that good.